RTA has a long history of investing in California real estate, as well as it being our home state. RTA will pursue industrial, retail, and office opportunities in Southern California markets with strong performance metrics, including Los Angeles, Inland Empire, Orange County and San Diego.
Los Angeles – LA’s industrial and retail markets are preforming well and projections are strong. The industrial market has been tight for the past five years, with vacancy rates below 4% during that period. Vacancy has been steadily dropping since the beginning of 2010 and currently sits at 2.2%. Lease rates have only recently begun to increase, albeit at 8.8% over the past year. Retail vacancies have been solid, holding within a few basis points of 6% since 2009, although market rents have declined slightly.
Inland Empire – RTA’s primary Inland Empire focus will be on industrial, as the office and retail markets remain somewhat soft. The industrial market vacancy rate has been steadily improving since 2009, currently at 5.4%. Lease rate growth has increased over the past couple years and an 8% growth rate is projected over the next year, despite the 11M square feet currently under construction. The retail market’s vacancy rate has been holding just above 10% for the past few years, while lease rates have dropped slightly, so retail will remain on our radar, but not as a primary focus.
Orange County – All three product types are doing well in OC, with industrial leading the way. The industrial market’s vacancy rate has been below 5% since 2009 and currently 3.2%. Lease rates have been on the rise for several years, although the growth rate slowed somewhat during 2013. The lack of supply has allowed new developed, with around 1.2M square feet under construction. Of the Southern California office markets, OC is experiencing the best results, with 12.3% vacancy, down from 18% in early‐2010. Lease rates have stabilized and, while no speculative office development is underway, a few large build‐to‐suit projects are scheduled for delivery by year‐end 2013. The retail vacancy rate has been below 6% for several years. Rental rates have been trending downward, but are projected to tick upward. There has been virtually no new retail construction, the one exception being a 460,000 square foot regional center in Buena Park.
San Diego – The softest of So Cal’s industrial markets is San Diego’s, with an 8.5% vacancy rate. That market is tightening quickly, however, and rental rates are on the upswing, so we will keep an eye out for opportunities. The office market is also gaining momentum, with a vacancy rate that has dropped from 20% to 14% since 2009. Office lease rates are increasing and the only new construction has been pre‐leased, build‐to‐suit or owner‐user deals. Retail has been San Diego’s strongest product type, with a vacancy rate floating around 7% for several years. Both vacancy and lease rates are projected to remain flat through the coming year.